Friday, September 28, 2007
The SEC today announced the filing of a settled civil injunctive action against Buca, Inc. (Buca), the Minneapolis-based corporate parent of the Buca di Beppo restaurant chain. The Commission's complaint, filed yesterday in federal court in Minneapolis, alleges that from 2000 to 2004, Buca materially understated the compensation of its top two officers, omitted significant related party transactions involving the company's former CEO and former CFO, and reported inflated income due to an earnings management scheme.
Specifically, the Commission's complaint alleges that Buca failed to disclose in its proxy statements and Forms 10-K for 2000 to 2003 that its former CEO improperly obtained reimbursement from Buca for personal expenses totaling nearly $850,000, including ATM cash withdrawals, duplicate airline tickets, family wedding expenses, dog kenneling, and home remodeling costs and that its former CFO improperly obtained reimbursement of more than $111,000 for vacations and visits to strip clubs and other personal expenses. The complaint further alleges that Buca reported inflated pre-tax income from 2000 to 2004 in amounts ranging from 18.8% to 36.9% due to a scheme orchestrated by its former CFO and former controller to meet earnings targets through improperly capitalizing approximately $11.9 million in expenses. Finally, the Commission's complaint alleges that Buca failed to disclose in its Forms 10-K for 2000 and 2001 its former CEO's and former CFO's participation in various related party transactions, including the former CEO's purchase of an Italian villa with Buca's funds and the former CFO's ownership interest in a vendor with which Buca transacted more than $1 million of business.